HARARE – A flood of imported goods has inspired the rise in year on year inflation, with furniture, clothing and household equipment leading the charge in prices, according to a report by the African Development Bank (AfDB).
Zimbabwe’s year on year inflation rate hit 175,6 percent in June, up from 97,85 percent in May 2019, with the southern African country continuing to lead its regional peers, followed by Angola.
Zimbabwe’s imports between January and May 2019 totalled $1,96 billion, which represented a 31 percent slide compared to the same period last year. Exports totalled $1,6 billion.
The inflationary rage, has made it difficult for Zimbabwe to achieve a year-end target of between 10 percent and 15 percent.
AfDB said Zimbabwe’s macroeconomic conditions remained volatile despite austerity measures that were implemented under the Transitional Stabilisation Programme in October last year.
“An analysis of month on month change in individual components of the consumer basket shows that in June 2019, the consumer basket was characterised by increases in the prices of tradable goods that have been chasing the then alternative market rate as majority of the goods are imported whilst non-tradable goods have been lagging behind,” said AfDB in its July 2019 report Zimbabwe report.
Before the abolition of the multicurrency system in February, government battled to contain a runaway currency alternative market, known as the “black market”, which triggered price volatilities.
Since then, the rate has relatively stabilised, trading at about the same rate as the interbank market.
“Between the period May and June 2019 furniture, household equipment and maintenance encountered the highest price increase of 63,8 percent followed by clothing and footwear, food and non-alcoholic beverages and health which increased by 59,9 percent, 55,1 percent and 46,5 percent respectively. Prices of non-tradable such as education, communication, housing water, electricity and other fuels and restaurants & hotels have been lagging behind changes in tradable goods,” the report noted.
In the past few months, the country has experienced one of its fastest rises in inflation since 2009, as prices in continue to increase due to macroeconomic shocks emanating from a volatile exchange rate.
“Zimbabwe’s inflation stands out as the highest in the region followed by Angola at 16,94 percent. Zambia recorded one of its highest inflation rates since November 2016 at 8,6 percent in June 2019. In June 2019 inflation rates in selected countries have largely been driven by changes in the prices of non-food items, whilst the prices of food & non-alcoholic products have remained relatively stable despite the effects of low rainfall on agriculture output,” said AfDB.
Last week government suspended announcing year on year inflation data until 2020.
Finance Minister Mthuli Ncube said the move had become necessary because there was no comparative data after the country returned to a mono currency.
However, some economists say Ncube is trying to keep the data out of the market as part of a strategy to manage inflation.
“In our view the re-basing of inflation figures could be a ploy by the Finance minister to ensure that Zimbabwe’s month-on-month inflation closes the year at 10 percent from a high of 32 percent in June this year,” said Econometer Global Capital.
“While rebasing is a common economic practice, Zimbabwe has largely been using its local currency in the past year due to shortages of the green back and like what used to occur then; prices continue to be benchmarked against movements on the foreign exchange market. The only difference is that government has effectively criminalised use of the dollar in some sectors, a development which has to some extent narrowed premiums between the formal market and the parallel market. Although, government postponed releasing inflation figures we still maintain a forecast of 480 percent for the year on year inflation for the year ending December 2019. We will continue to avail inflation forecasts as the year progresses,” Econometer noted.